Under Christie, state oversight of Newark finances becomes more exhaustive

Saed Hindash/The Star-LedgerNewark Mayor Cory Booker in this May file photo. For at least half of Booker's tenure,city finances have been under state control, but the process is becoming much more arduous under Christie than under former N.J. Gov. Jon Corzine.

NEWARK — In 2008, Newark needed $45 million from the state to balance its budget. In 2009 it needed $12 million.

In 2011, the city got a $32 million shot in the arm from state taxpayers, in the form of transitional aid, to help with its $615 million budget.

For at least half of Mayor Cory Booker’s tenure, city finances have been or will be under state control. Under former Gov. Jon Corzine the oversight was cumbersome. Under Gov. Chris Christie it promises to be exhaustive.

"Under Corzine, the MOU and ‘oversight’ was little more than a fig leaf," said Local Government Services Director Thomas Neff, referring to past "memoranda of understanding" signed by the city and state. "Many would characterize it as a sham."

The memorandum signed by Newark and the state last month is more detailed and calls for two monitors to ensure compliance.

While state aid is a significant part of every municipality’s budget, the $32 million is emergency funding needed at the last minute to pay its bills.

Despite shaving almost $100 million in spending from the 2010 budget and raising property taxes by more than 20 percent over the last two years, Newark still came up short.

"It’s what you expect: When you don’t balance your books, the state takes over. The bad part is that when they did this in Trenton, they gave them the money," said Dan O’Flaherty, a Columbia economist who closely follows Newark’s finances, referring to the $22 million the state gave to Trenton in transitional aid.

According to a memorandum of understanding signed this month between Newark and the state’s Department of Community Affairs, the $32 million is a loan. But the city says the money is not a loan, at least not the kind you have to pay back.

"The ‘loan’ is in effect a form of transitional aid and doesn’t require repayment," said city spokeswoman Anne Torres by e-mail.

The DCA said that’s not quite accurate.

"Newark is required to pay back the loan, but we will consider loan forgiveness if there is progress with the MOU, if substantial steps are taken to rectify the structural budget problem and only if there are sufficient funds in the State’s Fiscal Year 2013 budget to forgive the loan." said Hollie Gilroy, a spokeswoman for the DCA.

O’Flaherty, once an adviser to former Mayor Kenneth A. Gibson, said if it is a loan, it flies in the face of established fiscal policy.

"If it’s a loan, it’s borrowing for current operations which is unconstitutional in New Jersey," he said.

Whatever the terminology or constitutionality, the oversight exercised by the state will likely be an imposition for Booker’s budget-makers, who have not had full fiscal autonomy for most of his tenure.

There will be two state officials — Robert Calise and Steven Ponella — camped out in City Hall making sure Newark complies with the memorandum which encompasses virtually every facet of city spending.

"The monitors’ on-site presence allows for thorough and timely review and resolution of municipal requests under the MOU and it allows monitors an ability to better interact with local folks and understand the local financial problems and help identify solutions to problems," Neff said.

The city will have to account for every dollar of the $27 million it received this year in Urban Enterprise Zone funds, unfettered state aid designed to promote business development.

Longevity pay, a bonus afforded to longtime employees, will be suspended.

The state will examine every employee’s records and has asked for an indication of which employees were appointed directly by Booker.

The city will be required to re-examine Booker’s thwarted effort to create an independent authority to run its water system. The proposal has irked many who last year successfully fought to table the mayor’s municipal utilities authority.

"Why are they asking the city to spend a million dollars to study something that’s already been studied and rejected?" O’Flaherty said.

But most shocking to Newark’s system will be the fact that its 2012 budget must be introduced by February 29, the due date for transitional aid, which it must take again this year. Last year, Newark didn’t introduce its budget until August and in 2010 it was done in June. While three years of state control flies in the face of home rule, some city leaders say the monitors are a needed restraint on spending.

"I welcome it," said East Ward Councilman Augusto Amador. "As long as the state is providing financial support to the city, I believe that the state has a fiduciary responsibility to oversee spending."

Central Ward Councilman Darrin Sharif said he hoped the oversight would bring greater transparency to city operations.

"I’m hoping that the monitors are not there just to watch what we spend," Sharif said. "I’m hoping they’re here to really work with the administration to make sure that they become more efficient managers of their resources."